4 practical Lean Startup steps to achieve Problem-Solution Fit by aligning a valuable customer segment and their underserved need with the value proposition of a business idea.
According to a post mortem research of global startups conducted by the venture capital database CB Insights, the most common reason why new ventures fail is because they build and launch something customers don’t want.
Luckily, there is a way to avoid all this pain right from the start by making sure to achieve problem-solution fit before you run out of money – which is, unsurprisingly the second most common reason why startups fail.
What is Problem-Solution fit?
What we don’t want to do is to build a solution in search of a problem. There is too much waste in the world to launch something customers don’t want.
Besides your time, the scarcest resource you have, really deserves to be used for something useful and purposeful!
Most of the entrepreneurs we meet have a great idea, and they love it so much that their secret desire would be to find a way to shove it down the throat of their customers. Some of these entrepreneurs even asked us: is there a way I can educate my customers so that they need what I do?
Well, we really don’t think this is best approach to be successful in venture building. The best way to put the energy, the resourcefulness, the creativity and the technical skills of an entrepreneur to service is to identify an existing problem and to solve it in with a solution that customers find useful and satisfying.
This is what we call Problem-Solution Fit: the evidence that a product, or a service, solves a customer’s problem.
How do you actually achieve Problem-Solution fit?
In January 2016, five planets were visible for a month all together in the same portion of the sky. Anyone looking up on a clear night could see Jupiter, Mars, Saturn, Venus and Mercury aligned, one after the other. This is called planet alignment, and it’s quite rare, the previous time it happened was back in 2005.
Well, achieving a problem-solution fit is as rare and difficult as planet alignment. You have to be able to align at least three big planets, namely a valuable customer segment, their underserved needs and your value proposition.
When it really works, magic things happen. By aligning these planets, even not so perfectly, you get in exchange: a good close rate, a decent sales cycle and retention and sticky end usage.
Let’s see how to achieve this, planet after planet.
A valuable customer segment
First of all, as for any big thing we want to achieve, we have to start somewhere.
Some of us come from the Alps, and the first thing we learned when we climbed our first peak was: you get to the top one step after the other.
Early adopters are the first step in the quest for product-market fit. Any successful startup has started focusing on one market at a time, starting from what is called a beach-head. By winning domination in that market, they use it as a springboard to expand to the adjacent ones, adjusting at every step; the whole product concept, the positioning of the product, the marketing strategy, and choosing the most appropriate distribution channel and pricing.
Customer’s underserved needs
After having identified the target customer segment, it’s time to investigate their needs.
One of the cheapest, fastest and most informative things to do at this stage is to meet with customers through customer discovery interviews (more about customer discovery interviews here and here) until we keep hearing the same things from customers. Meeting with a customer is an invaluable source of insights, much more valuable than a survey.
Besides, as entrepreneurs, our job is to meet and pitch to customers all the time, we’d be better off to start earlier rather than later.
A winning value proposition
After having identified a target segment of customers and having explored their needs, it’s time to define a winning value proposition.
A value proposition is a statement that defines why you are different and worth getting attention. It’s possibly around 300 characters long, and includes:
– the target segment
– the key problem
– the key benefit your customers are going to get
– the special and unique way you will deliver it
A good template is “We help (who?) achieve (what benefit?) by doing (the special and unique way the new business/new product is doing it)”.
We normally work with value propositions made of such a main statement and three key pillars, or the product features that we want customers to understand and remember.
What makes a value proposition a winning one?
– It’s focused on what matters to customers. Any product feature is ideated based on customer needs validated during customer discovery interviews, and ranked based on how big is the pain and the company’s key strength.
– It’s able to solve the main problems in a unique way, better than competitors. In order to check this, we use a customer-centric competitive analysis.
Aligning the planets
Once we have designed a value proposition, the key question is: will customers use and buy this?
Since the uncertainty is so high, it’s crucial to identify what is the cheapest and fastest way to test whether customers would buy our product or not.
We normally select a test from this library of lean experiments, and seek commitment from customers in one of these forms: time, reputation or actual money.
The commitment is related to what we can ask today based on the stage of product development. If it’s a paper mock-up, we can’t really expect any customer to pay for it.
If we are meeting with customers, which is normally the cheapest thing to do to validate a value proposition, that meeting would be a failure if we don’t know what happens next. And this would be because:
- the product needs iteration or pivoting (so back to the whiteboard and re-design the value proposition).
- we may not explicitly ask for clear commitment and next steps (a scary thing to do sometimes).
In order to achieve product-market fit, we keep iterating until we get a consistent commitment from customers. This means that we keep tweaking the product features and the commercial elements of the proposition.
Depending on the expertise of the team, how easy it is to access customers and the complexity of the product itself, this might take from just a week to months.
But the preparatory work completed before trying to align the planet will be of enormous help to make this time shorter, as we will be proposing to customers something strictly aligned with their pain points and offering a solution much better than competitors do.